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Expenses of employment

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The FTT has recently had to consider whether the payment of fees to his agent were a deductible expense for a professional footballer – that is to say, whether the expenditure was incurred wholly, exclusively and necessarily in the performance of the duties of the employment.

More precisely, ITEPA 2003 s 336 provides that to be eligible for a deduction for an item of expenditure:

  • the employee is obliged to incur and pay it as holder of the employment, and
  • the amount is incurred wholly, exclusively and necessarily in the performance of the duties of the employment.

I have referred many times to the acute difficulty, if not impossibility, of an expense falling within these words, and I won’t bang on any more about it – only to say that the claim was clearly hopeless and rejected roundly by the FTT in Niasse v HMRC [2024] UKFTT 179 (TC) (reported in Tax Journal, 15 March 2024).

In that case, there was an interesting suggestion that footballers are ‘theatrical artists’ to which some special rules apply. The FTT did not think so – to my great surprise. After all, anybody who has ever watched a football match knows that is obviously the case. The rolling on the ground clutching a random (and entirely irrelevant) part of their body is just one example of a pure theatrical performance.

The taxpayer had some interesting and ingenious arguments, but there was no getting away from the crucial fact that the duties of his employment were to play football. I don’t remember there being any part of a football match where the players hand money (or otherwise incur expenditure) to their agent while they are running up and down the pitch – which (absurd or not) is exactly the relevant test. (The test is notoriously strict. As the House of Lords explained in Fitzpatrick v IRC 66 TC 407, doing something preparatory to the work is not enough; it has to be ‘in the performance of the duties’.)

Coincidentally, the recent case of Investment and Securities Trust Ltd v HMRC [2024] UKFTT 230 (TC) (reported in Tax Journal, 5 April 2024) examined the meaning of ‘exclusively’. This was not for s 336 purposes but for the purposes of ATED under FA 2013 s 138 where there is a relief if the property is held exclusively for a property development trade. The FTT’s analysis is detailed and compelling and just serves to emphasise how difficult it is to satisfy the wholly and exclusively (let alone necessarily) test. 

Issue: 1660
Categories: In brief